SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
F O R M 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of November, 2007
MAGIC SOFTWARE ENTERPRISES LTD.
(Name of Registrant)
5 HAPLADA STREET, OR-YEHUDA, ISRAEL 60218
(Address of Principal Executive Office)
Indicate by check mark whether the registrant files or will file annual reports under
cover of Form 20-F or Form 40-F.
Form 20-F [X] Form 40-F [_]
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1): [_]
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(7): [_]
Indicate by check mark whether by furnishing the information contained in this
Form, the registrant is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes [_] No [X]
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): 82 -Inquiries:
US Press Inquiries:
 |
MAGIC SOFTWARE REPORTS RECORD REVENUES FOR Q3 2007
OR YEHUDA, ISRAEL, NOVEMBER 08, 2007 - Magic Software Enterprises Ltd. (NASDAQ:
MGIC), a leading provider of business integration and development technology,
today announced financial results for the third quarter and nine-month period
ending September 30, 2007.
RESULTS FOR THE THIRD QUARTER
Revenues for the third quarter of 2007 reached a record $17.6 million, an
increase of 5% compared with $16.8 in the second quarter of 2007, and 17%
compared with $15.1 million in the third quarter of 2006.
On a U.S. GAAP (Generally Accepted Accounting Principles) basis, operating
income for the third quarter was $1.1 million, up 10% compared with $1.0 from
the second quarter of 2007, and a significant improvement compared to the $3.6
million operating loss recorded in the third quarter of 2006. GAAP net profit
for the period was $0.8 million, or $0.02 per share compared to $0.8 million, or
$0.03 per share, in the second quarter of 2007, and a net loss of $3.5 million,
or $0.11 per share, in the third quarter of 2006.
GAAP results include amortization expense as well as non-cash charges taken for
the capitalization of intangible assets and stock-based compensation.
Excluding these expenses, non-GAAP operating income for the third quarter was
$1.3 million, up 44% compared with $0.9 million in the second quarter of 2007.
Operating loss for the third quarter of 2006 was $3.0 million. Non-GAAP net
income for the period was $0.9 million, or $0.03 per share, an increase of 29%
compared with $0.7 million, or $0.02 per share, in the second quarter of 2007.
Non-GAAP net loss for the third quarter of 2006 was $2.9 million, or $0.09 per
share.
Reconciliation between GAAP and Non-GAAP results is summarized in the following
table. For a complete reconciliation, please refer to the tables appended to
this release.
(IN MILLIONS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)
U.S. GAAP BASIS Q3 2007 Q2 2007 Q3 2006
Revenues $17.6 $16.8 $ 15.6
Operating income (loss) $ 1.1 $ 1.0 $ (3.6)
Net income (loss) $ 0.8 $ 0.8 $ (3.5)
Basic EPS (loss) $0.02 $0.03 $(0.11)
NON GAAP Q3 2007 Q2 2007 Q3 2006
Revenues $17.6 $16.8 $ 15.6
Operating income (loss) $ 1.3 $ 0.9 $ (3.0)
Net income (loss) $ 0.9 $ 0.7 $ (2.9)
Basic EPS (loss) $0.02 $0.02 $(0.09)
RESULTS FOR THE NINE-MONTH PERIOD
Revenues for the first nine months of 2007 were $50.8 million, a 12% increase
compared to $45.5 million in the first nine months of 2006.
On a U.S. GAAP basis, operating income for the nine-month period reached $3.2
million compared to an operating loss of $5.2 million in the first nine months
of 2006. Net profit for the period on a GAAP basis was $2.6 million, or $0.08
per share, compared to a net loss of $5.0 million, or $0.16 per share, recorded
in the first nine months of 2006.
On a non-GAAP basis, operating income for the first nine months of 2007 was $3.3
million, compared to a non-GAAP operating loss of $4.9 million in the nine month
of 2006. Net income on a non-GAAP basis for the nine-month period was $2.8
million, or $0.09 per share, compared to non-GAAP net loss of $4.7 million, or
$0.15 per share, for the first nine months of 2006.
COMMENTS OF MANAGEMENT
Commenting on the results, Eitan Naor, President and CEO of Magic Software,
said, "Having reported record revenues for the third quarter together with four
quarters of consecutive growth, we are ready to focus our attention on improving
the Company's execution and profitability. We have recently strengthened our
management team in line with our plan for building a stronger organization in
2008."
Mr. Naor continued, "During the reporting period, we continued to improve our
execution, with the following ACHIEVEMENTS STANDING OUT AS HIGHLIGHTS:
o We achieved SIGNIFICANT CROSS SALES into our customer and partner base.
o In the IBM SPACE, we reinforced our partner base via the addition of a
significant competitive partner win in the Netherlands.
o We performed well in our TARGET ECOSYSTEM MARKET.
o We expanded our FOOTPRINT IN THE JD EDWARDS COMMUNITY through the addition
of new partners and new sales in the US.
o We continued to grow our SAP BUSINESS ONE partner base, and signed a
significant deal that builds on our combined presence in the SAP and BMC
communities."
Mr. Naor concluded, "We are now working on two parallel tracks: to improve our
short-term results and bottom line performance, we are streamlining our
operational capabilities; at the same time, we are formulating a detailed
strategy for fueling our long-term growth. I look forward to reporting progress
on both these fronts in the year ahead."
NON-GAAP FINANCIAL MEASURES
This release includes non-GAAP basic and diluted earnings per share and other
non-GAAP financial measures, including cost of service, research and
development, selling, general and administrative, operating income, income taxes
and net income. These non-GAAP measures exclude the following items:
- Amortization of purchased intangible assets;
- In-process research and development capitalization and;
- Equity-based compensation expense.
Magic's management believes that the presentation of non-GAAP measures provide
useful information to investors and management regarding financial and business
trends relating to the company's financial condition and results of operations
as well as the net amount of cash generated by its business operations after
taking into account capital spending required to maintain or expand the
business.
For its internal budgeting process and in monitoring the results of the
business, Magic's management uses financial statements that do not include
amortization of purchased intangible assets, in-process research and development
capitalization and equity-based compensation expense. Magic's management also
uses the foregoing non-GAAP financial measures, in addition to the corresponding
GAAP measures, in reviewing the company's financial results.
These non-GAAP financial measures are not in accordance with, or an alternative for, generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. In addition, these non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles. Magic believes that non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with Magic's results of operations as determined in accordance with GAAP and that these measures should only be used to evaluate Magic's results of operations in conjunction with the corresponding GAAP measures. Please refer to the Reconciliation of Selected Financial Metrics from GAAP to Non-GAAP tables below. CONFERENCE CALL Magic Software's management will also host a conference call today at 10 am EST, 3 pm GMT, and 5 pm in Israel. To participate in the conference call, please call the appropriate number listed below at least five to ten minutes prior to the start of the call: From the US: 1 888 642 5032 From Canada: 1 866 485 2399 From UK: 0 800 917 9141 From Israel: 03 918 0688 All others: +972 3 918 0688 Callers should reference the Magic Software Earnings Conference Call. For those unable to listen to the conference call, there will be a replay available from the investor relations part of Magic's web-site at: www.magicsoftware.com. ABOUT MAGIC SOFTWARE ENTERPRISES Magic Software Enterprises Ltd. (NASDAQ: MGIC) has been a leader in enterprise application development, deployment and integration technology for more than two decades. The company's service-oriented (SOA) platforms are used by companies worldwide to develop, maintain, and deploy both legacy and new business solutions, while integrating these applications across both internal and external, heterogeneous environments. Magic Software's platform-independent methodology lets companies achieve agility by quickly assembling composite applications, allowing programmers to create services and architects and business analysts to orchestrate and reuse these services to enable business processes. Through partnerships with industry leaders such as IBM and SAP and more than 2500 ISVs worldwide, Magic Software technology is used by more than 1.5 million customers around the globe. Magic Software is a subsidiary of the Formula Systems and Emblaze Group of companies. For more information on Magic Software Enterprises Ltd. and its products and services, visit www.magicsoftware.com. Except for the historical information contained herein, the matters discussed in this news release include forward-looking statements that may involve a number of risks and uncertainties. Actual results may vary significantly based upon a number of factors including, but not limited to, risks in product and technology development, market acceptance of new products and continuing product conditions, both here and abroad, release and sales of new products by strategic resellers and customers, and other risk factors detailed in the Company's most recent annual report and other filings with the Securities and Exchange Commission. CONTACT: DAVID ZIGDON, CFO Magic Software Enterprises Ltd. Tel. +972 (0)3 538 9600 dzigdon@magicsoftware.com
MAGIC SOFTWARE ENTERPRISES LTD
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
2007 2006 2007 2006
-------- -------- -------- --------
(unaudited) (unaudited) (unaudited) (unaudited)
-------- -------- -------- --------
Sales $ 17,632 $ 15,117 $ 50,804 $ 45,536
Cost of revenues 7,936 7,312 23,320 21,179
-------- -------- -------- --------
Gross profit 9,696 7,805 27,484 24,357
Software development costs, net 1,140 1,338 3,236 3,114
Selling, general and administrative expenses 7,458 7,986 21,087 24,313
Restructuring expenses - 2,125 - 2,125
-------- -------- -------- --------
Total operating expenses 8,598 11,449 24,323 29,552
-------- -------- -------- --------
Operating income (loss) 1,098 (3,644) 3,161 (5,195)
Financial income (expenses), net (172) 191 (53) 286
-------- -------- -------- --------
Income (loss) before taxes 926 (3,453) 3,108 (4,909)
Taxes on income (119) (55) (462) (241)
-------- -------- -------- --------
807 (3,508) 2,646 (5,150)
Minority interest (7) 26 (5) 94
Equity gain (loss) (31) (49) (51) 20
-------- -------- -------- --------
Net income (loss) 769 (3,531) 2,590 (5,036)
======== ======== ======== ========
Basic net earnings (loss) per ordinary share $ 0.02 $ (0.11) $ 0.08 $ (0.16)
======== ======== ======== ========
Diluted net earnings (loss) per ordinary
share $ 0.02 $ (0.11) $ 0.08 $ (0.16)
======== ======== ======== ========
Weighted average number of
ordinary shares used in
computing basic net earnings
(loss) per ordinary share 31,486 31,210 31,417 31,150
Weighted average number of
ordinary shares used in
computing diluted net earnings
(loss) per ordinary share 31,831 31,210 31,970 31,150
MAGIC SOFTWARE ENTERPRISES LTD
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
2007 2006 2007 2006
-------- -------- -------- --------
(unaudited) (unaudited) (unaudited) (unaudited)
-------- -------- -------- --------
GAAP operating income (loss) $ 1,098 $ (3,644) $ 3,161 $ (5,195)
Amortization of intangibles 736 1,193 2,292 2,874
Capitalization of software
development (698) (516) (2,310) (2,530)
Stock-based compensation 131 - 186 -
-------- -------- -------- --------
Total adjustments to GAAP 169 677 168 344
-------- -------- -------- --------
Non-GAAP operating income (loss) $ 1,267 $ (2,967) $ 3,329 $ (4,851)
======== ======== ======== ========
GAAP net income (loss) $ 769 $ (3,531) $ 2,590 $ (5,036)
Total adjustments to GAAP as above 169 677 168 344
-------- -------- -------- --------
Non-GAAP net income (loss) $ 938 $ (2,854) $ 2,758 $ (4,692)
======== ======== ======== ========
Non-GAAP basic earnings
(loss) per share $ 0.03 $ (0.09) $ 0.09 $ (0.15)
======== ======== ======== ========
Weighted average number of
ordinary shares used in
computing basic net earnings
(loss) per ordinary share 31,486 31,210 31,417 31,150
======== ======== ======== ========
Non-GAAP diluted earnings
(loss) per share $ 0.03 $ (0.09) $ 0.09 $ (0.15)
======== ======== ======== ========
Weighted average number of
ordinary shares used in
computing diluted net earnings
(loss) per ordinary share 31,831 31,566 31,970 31,568
======== ======== ======== ========
MAGIC SOFTWARE ENTERPRISES LTD
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF U.S. DOLLARS)
AS OF AS OF
SEPTEMBER 30, DECEMBER 31,
2007 2006
------- -------
(unaudited) (unaudited)
------- -------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $12,232 $ 8,162
Short term bank deposits 87 69
Marketable securities 4,037 4,649
Trade accounts receivable 13,429 12,365
Other receivables and prepaid expenses 3,487 2,472
Inventory 280 328
------- -------
Total Current Assets 33,552 28,045
------- -------
NON-CURRENT ASSETS
Severance pay fund 2,215 2,176
Long term deposits 567 576
Investment in affiliated companies 162 213
Fixed assets, net 6,256 6,414
Goodwill 21,647 21,624
Other assets, net 10,966 10,863
------- -------
Total Non-Current Assets 41,813 41,866
------- -------
TOTAL ASSETS $75,365 $69,911
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term credit from banks $ 4,094 $ 4,514
Trade accounts payable 3,237 3,491
Accrued expenses and other liabilities 13,880 11,399
------- -------
Total Current Liabilities 21,211 19,404
------- -------
NON-CURRENT LIABILITIES
Long-term loans 201 233
Accrued severance pay 2,555 2,499
Minority interests 137 131
------- -------
Total Non-Current Liabilities 2,893 2,863
------- -------
SHAREHOLDERS' EQUITY 51,261 47,644
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $75,365 $69,911
======= =======
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. MAGIC SOFTWARE ENTERPRISES LTD. (Registrant) BY /S/ EITAN NAOR ----------------- Eitan Naor President and CEO Date: November 8, 2007